State looks to tap city revenue

Editor's Note: Solving the $24 billion state budget deficit meant cuts to local programs. In this series, the Journal looks at how they may affect you.
Up to $500,000 may be borrowed from city of Auburn under provisions in the state budget signed by Gov. Arnold Schwarzenegger this week.
The state was able to close its $24 billion budget deficit in part by taking revenue, including property taxes, transportation funds and redevelopment agency revenue, from local cities and counties.
“We will be impacted and have been impacted up until budget signed passed by the governor,” said Auburn Mayor Mike Holmes. “Because of the uncertainty of what the state would take away, certain assumption had to be made. My guess is that this is going to cost the city between $400,000 and $500,000.”
The figure includes at least $350,000 in property taxes. Property tax money can be borrowed under Proposition 1A, the 2004 initiative which allows the state to borrow local property tax funds in years of fiscal hardship.
“We put together the initial budget for the city council including Prop. 1A with the assumption that we would take significant losses due to the state budget,” Richardson said. “So we’re fully prepared to revise the budget.”
Specifics were not available on what city departments would be affected. Richardson said a detailed revise of the city’s budget would be presented to the council within 60 to 90 days.
Economic conditions have already resulted in less revenue for the city. Previous cost-cutting measures include laying off nine employees in June, a savings of $1.2 million annually. Eighteen city managers and elected officials also agreed to have their pay trimmed by 10 percent on May 1, shaving $150,000 off this year’s budget
Mayor Holmes was unsure about where the money the state is taking would be cut from Auburn’s budget and whether it would result in more layoffs.
“We are going to be looking at some more reorganization at city hall to make operations more efficient,” Holmes said.
The state would have three years to pay the property taxes back to the city with interest, however Prop. 1A could allow a three-year hold on repayment.
“The state has made a series of very optimistic assumptions that may not pan out,” Richardson said. “That money could go away and we could not see it for six years.”
The city’s redevelopment agency, which funds beautification projects such as Streetscape, will also be affected. Richardson said the agency’s fund is “financially healthy” and would still be able to move forward with projects.
The question of how city departments or residents will be affected by a loss of up to half a million dollars remains to be answered.
“Up until this point staff has done a really good job of maintaining service levels despite the loss of a lot of folks,” Richardson said. “Once we have a firm handle on our financial position again, we’ll work with staff to come up with best methods for continuing our service level.”